"The best doll this year ... has been the Bratz doll," said Grow, owner of Gregory's Toys, an independent store in Encino. "Barbie has lost a lot of steam."

Mattel Inc., the world's largest toy maker, is not accustomed to seeing its flagship fashion doll face such stiff competition. Its line of electronic learning toys also is faltering in what has become a tight market for toy producers.

"Those are two key categories for us," said Robert Eckert, chairman and chief executive officer of Mattel. "We had been gaining market share for the last several years, and in fact we lost market share in the first part of this year."

Sean McGowan, a toy industry analyst at Harris Nesbitt Gerard, estimated that Mattel's share of the fashion doll market has dropped from 75 percent to about 60 percent since 2000.

The toymaker has other problems. Along with increasing competition, Mattel has been weathering the fallout of 2002's dismal holiday season that led to a surplus of inventory and tighter spending by retailers. And it has seen its profit margins weaken amid pricing pressure from Wal-Mart Stores Inc. and other discounters.

Eckert took over as CEO three years ago as Mattel struggled to overcome the ill-fated $3.5 billion acquisition of software maker Learning Co. As he focused on building the firm's core brands like Barbie and Hot Wheels, company stock bounced back and international sales increased.

But domestic sales lagged during the first three quarters of this year.

"We did spend the first part of this year working off those inventories," Eckert said. "On top of that, our own product line was not doing particularly well in the first part of this year."

Through August, Bratz dolls topped the fashion doll market, according to The NPD Group, a marketing firm. The line produced by MGA Entertainment sports a sexy, urban look that embodies contemporary teen fashion.

"Right now, there's nothing but the Bratz dolls," said consumer Jennifer Joyce of La Crescenta, whose 10-year-old daughter used to collect Barbies but has moved on to Bratz.

Mattel has tried to keep Barbie edgy by marketing the My Scene Barbie, which sports a youthful, contemporary style, and the hip-hop-inspired Flava doll line.

Grow, the Encino toy shop owner, said his customers haven't shown much interest in the My Scene dolls, which hit stores last year, or the Flava dolls, which debuted during the summer. Chain stores such as Wal-Mart and Target have discounted the dolls, trying to move them off the shelves.

"I have carried the My Scenes a little bit, but I don't find it to be a particularly good seller," Grow said. "Flavas are kind of racy. I would carry them if they would sell, but I haven't had many requests for them."

Jill Krutick, an analyst with Citigroup Smith Barney, believes Mattel is well-positioned heading into 2004 because of ongoing product innovations.

The company is counting on a new race track called T-Wrecks that features a dinosaur that swallows and then spits out toy cars. To keep the interest of older kids who played with Barbies and Hot Wheels as children, Mattel has started marketing tie-in videos, clothing, cameras and electronic games.

Eckert remains confident in the fashion doll market, and in the company's new products for its line of electronic learning toys, such as the PowerTouch learning system.

Mattel's main competitor, Hasbro Inc., has gained momentum in recent years with popular brands such as Transformers and Beyblade, a line of shooting toys.

In the past 12 months, Hasbro stock has gone from just under $12 to its current $21. Mattel's stock is hovering around $19 — the same level where it traded a year ago.